Why Are Tech and SaaS Stocks Selling Off Right Now?

Why Are Tech and SaaS Stocks Selling Off Right Now?

You have probably felt the brute force of this sell-off first-hand. Many portfolios have taken a hit, and it is not just the speculative end of the market.

Even some of the ASX mid and large-cap darlings, names like Xero and WiseTech Global, are now more than 20% off their peaks. When that happens, it is natural for investors to ask: what has actually changed?

What is striking is how reactive the market feels right now. Price action is being driven less by hard evidence of business deterioration, and more by narrative, positioning, and fear. The story moves first, and the fundamentals get debated later.

The latest example is the market’s response to Anthropic and its recent capability releases. The headline message is simple: AI systems are getting better at completing real work across a wide range of job functions with less instruction, operating with greater autonomy.

Whether or not that directly threatens incumbents today, the market is trading the second-order implication. If AI can compress workflows, automate tasks, and reduce the need for point-solution software, then the default reaction is to de-rate high-multiple software first and ask questions later.

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Anthropics new capabilites

Anthropic has just shown another step-change in what “agentic” AI can do in the real world. Its new legal capability can review contracts and handle other domain-specific tasks, and the direction of travel is obvious: more specialised workflows in finance, customer service, and beyond are likely to follow as these toolkits mature.

It is not hard to see why the market reacts first and asks questions later. If an AI system can complete higher-value knowledge work with less instruction and more autonomy, investors immediately start extrapolating the risk to software margins and pricing power across SaaS. That is where the “Anthropic is killing SaaS” headline comes from.

Does that mean the extinction of Saas Stocks?

In our view, that headline is more fear than framework.

The key point is this: these agents are not replacing the infrastructure that sits underneath modern businesses. They are typically designed to sit on top of existing SaaS systems, pull context, automate steps, and produce better outcomes from the workflows companies already run.

So the realistic base case is not “a model provider replaces Salesforce-class platforms.” The realistic outcome is:

• agent layers sit on top of SaaS systems of record
• SaaS vendors ship agents inside their own products

That is an augmentation story, not an extinction story.

Now, that does not mean there are no losers. There will absolutely be value destruction in pockets, especially where products are thin wrappers around repetitive tasks and where switching costs are low. With the amount of spending required to build, deploy, and govern these systems at scale, some companies will over-invest, under-deliver, and disappoint.

Equally, a smaller group of winners will emerge, and they will likely see meaningful earnings uplift as automation expands margins and increases customer value. That is classic creative destruction. It is not new. It is simply playing out in a high-growth sector, in real time.

And this is where the highest-quality SaaS businesses still have a structural edge. Companies like Xero and WiseTech Global are not just interfaces. They sit on enormous proprietary datasets and embedded workflows, with deep integrations and compliance complexity. That data and distribution becomes even more valuable in an agentic world, because it is the fuel and the permission layer that determines whether the agent can act safely, accurately, and at scale.

The Takeaway for Investors

Nvidia (NVDA) CEO Jensen Huang said he thought this week’s sell-off of software company shares was “illogical.”

“It’s the most illogical thing in the world,” Huang said at the Cisco AI Summit late Tuesday, according to Bloomberg. “There’s this notion that the tool is in decline and being replaced by AI. Would you use a screwdriver or invent a new screwdriver?”